South posts greatest mortgage rate drop amid cooling housing market

Mortgage rates have climbed steadily for five months, but they’re still below where they stood a year ago. Nowhere is that more apparent than in the South.

On average, Southern states experienced a more than 2.2 percent decline in their average 30-year mortgage rate, according to a TRD Data analysis of 30-year mortgage rate data as of July 15, 2025 and July 16, 2026 from Investopedia. (Rates are for new purchase loans with a down payment of at least 20 percent and a credit score of 680-739.)

West Virginia led the way, with a 3.6 percent slide, putting the Mountain State’s rate at 6.75 percent — the 15th lowest in the country. That marks a shift from the same time last year, when West Virginia’s 7 percent average interest rate was the highest in the U.S., per TRD Data’s analysis.

State variation in mortgage rates stem from competition for borrowers, borrower quality, which includes credit ratings and foreclosure risk, and home prices, said Caleb Silver, chief business editor at People Inc., which owns Investopedia.

The South continues to grapple with an oversupply of homes, which has reduced the competition for homebuying and, therefore, mortgages, Silver said. Home prices also are generally lower in the South, contributing to lower rates.

In June 2024, active listings in the South surged almost 28 percent year over year; they climbed again by more than 17 percent the year after, according to a TRD Data analysis of Redfin data. This past June, they dipped, but barely, by just 0.3 percent.

Nationwide, the average 30-year, fixed-rate mortgage rate clocked in at 6.55 percent as of last Thursday, according to Freddie Mac data. Rates had declined over the second half of last year and in the early months of 2026 as the Federal Reserve slashed its benchmark interest rate three times.

However, the national average has been rising since the end of February, when the U.S. entered into war with Iran, as economic uncertainty has triggered the yield on the 10-year Treasury bond to increase. Last Thursday, Freddie Mac’s rate hit its highest level since Sept. 4, 2025.

The growth in financing costs has led to the housing market being in a “deep freeze,” Silver said.

“You have reluctant sellers and you have buyers who either don’t want to get in at this higher rate or can’t afford the down payment or the home or the monthly payment.” he said.

Not all states saw markedly high drops in their average interest rates. For instance, the state with the lowest drop, of roughly 0.6 percent, was Montana. The state’s average rate of 6.8 percent is tied with Wyoming’s and Utah’s for the fourth-highest in the country.

Meanwhile, the state with the highest average interest rate was Alaska, at 6.85 percent. Rates in Alaska tend to skew higher as home construction is more expensive than in other parts of the country and there are fewer lenders.

Alaska’s rate had fallen about 1.9 percent year over year, but since other states’ rates fell more, Alaska jumped in the rankings from second last year to first this year.